Potash producers have stockpiled significant inventories — 33% above their five-year average, says Rodriguez — and buyers are in no hurry to stock up early even as farmers are expected to plant a record amount of crops next year.

In particular, China and India appear likely to drive hard bargains when they buy the nutrient.

“Despite strong crop fundamentals which will support fertilizer demand, we expect potash prices to drift lower. While contract timing is uncertain, prices in China could go down $15-$20/mt from the current $470/mt in order to get a contract done. India, which is already threatening to sit out the remainder of the year, won’t likely come to the table unless prices are at least on par with China (India’s last contract was $490-$530/mt). Despite strong demand in Brazil, prices have drifted down $20-$25/mt to $490-$500/mt; and the June $20/st price cut in the U.S. to entice summer fill is still in place.”

The weakness in the stocks may make them seem compelling, but Rodriguez warns investors not to bite.

“While we would have liked to keep recommending the stocks and say buy on weakness, we can’t really point to any imminent improvement in fundamentals or upward earnings revisions that should lead to meaningful stock price appreciation.”

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.